'More households have fewer funds available after paying for rising living costs to meet debt obligations'
The average income of people filing for insolvency in Canada has increased, according to a new study.
Average household income rose by 5.5 per cent to $3,162 per month after taxes in 2019 while household expenses grew by 6.4 per cent. This leaves households just $264 a month to pay debts, down from $273 in 2018, says Hoyes, Michalos & Associates.
"People are not getting a raise of this magnitude," says Doug Hoyes, a licensed insolvency trustee. "What is happening is that more prosperous households are now reaching the breaking point and tipping into insolvency."
The median income for an insolvent debtor increased by 5.8 per cent to $2,883 in 2019. In 2019, 23 per cent of insolvencies involved households with an average household income above $4,000 per month, up from 20 per cent in 2018.
Average consumer debt among insolvent debtors grew by 1.9 per cent to $58,923 in 2019, says Hoyes.
"More households have fewer funds available after paying for rising living costs to meet debt obligations. Combine this with high, pre-existing debt, and you have a debt repayment problem,” says Ted Michalos, a licensed insolvency trustee. "These financial pressures are affecting all ages; however, the pace of growth among young Canadians is staggering. Those under the age of 40 now account for almost half (47.1 per cent) of all insolvencies, a level not seen since we began our study in 2011."
Credit card debt is no longer the primary debt in consumer insolvencies, accounting for 30 per cent of unsecured debt, compared to 32 per cent in 2018, and 43 per cent in 2011, says the firm.
Instead, there’s been a continuing rise in the use of payday or fast-cash loans, high-cost financing loans, student debt, and vehicle financing.
A recent Canadian study found many people with healthy incomes are stressed about finances.